Sources and Uses Statement: A Commercial Borrower's Guide

01

Why the Sources-and-Uses Statement Matters

The schedule is a control document for the entire financing request. It tells the lender how much capital the transaction requires, how the requested debt was calculated, what the borrower will contribute, which obligations will be paid, and whether funds remain for operations or reserves after closing. It also gives the credit team a starting point for leverage, equity, eligibility, collateral, and repayment analysis. A strong schedule balances to the dollar and agrees with supporting contracts and statements as of a clearly identified date.

02

Build the Uses Side From Verifiable Costs

Start with the actual transaction rather than a target loan amount. Common uses include the purchase price, refinance payoffs, construction or renovation costs, equipment, inventory, eligible working capital, professional fees, lender fees, appraisal and environmental costs, title and legal charges, taxes, insurance, required reserves, and other closing expenses. Distinguish signed contracts and current quotes from estimates. If a budget contains contingencies or owner-performed work, label them clearly and explain the basis. Do not hide a funding gap by omitting a cost that must be paid before or shortly after closing.

• Requested amount and use of proceeds
• Historical and current financial statements
• Complete debt and ownership schedules
• Collateral and transaction documentation

03

Identify Each Source and Its Conditions

Sources may include senior debt, subordinate debt, seller financing, equipment facilities, investor capital, borrower cash, documented deposits, grants, or other transaction-specific funds. Show the amount, provider, status, and any conditions for each source. Separate committed funds from proposed funds, and identify whether subordinate debt requires payment, accrues interest, or must be on standby. If equity comes from more than one owner or entity, state each contributor and trace the funds without exposing unnecessary account information.

04

Reconcile Equity, Deposits, and Cash Needed to Close

Borrowers often focus on the equity percentage and overlook timing. A deposit already paid may count toward the contribution only if it is documented and treated consistently by the lender. The final cash-to-close figure must account for credits, prorations, lender reserves, closing costs, and any ineligible expenses that cannot be financed. Create a separate equity trail showing the source, current location, transfer path, and availability date. Avoid unexplained last-minute transfers, new debt, or temporary funds that may raise questions about ownership and repayment obligations.

05

Keep Acquisition and Refinance Proceeds Separate

In an acquisition, the schedule should tie to the executed purchase agreement, allocation of assets when relevant, improvement budget, and closing statement. In a refinance, list every payoff, accrued interest, prepayment charge, lien release, and requested cash-out use. Do not assume the current principal balance equals the payoff amount. When one closing combines property, equipment, working capital, or business acquisition costs, organize the uses by category so the lender can apply eligibility, collateral, amortization, and advance-rate rules correctly.

06

Test the Schedule Against Underwriting Constraints

A balanced schedule can still be unfinanceable. Recalculate the request under conservative loan-to-value, loan-to-cost, debt-service, debt-yield, and liquidity assumptions applicable to the transaction. Consider whether the lender will recognize all projected value, reimburse costs incurred before approval, finance soft costs, or include working capital. If proceeds decline after appraisal or underwriting, show which source fills the gap and whether post-closing liquidity remains adequate. A credible contingency plan is stronger than assuming every initial figure survives review.

07

Control Changes Through Commitment and Closing

Sources and uses evolve as bids, third-party reports, payoff statements, insurance, reserves, and lender conditions become final. Maintain one dated master schedule, record each revision, and circulate it with consistent totals. Changes to purchase price, seller credits, equity, contractor scope, or other financing should be disclosed promptly because they can affect approval and documentation. Before closing, reconcile the schedule to the commitment, settlement statement, payoff letters, invoices, wire instructions, and required borrower contribution.

08

Use a Final Borrower Quality-Control Checklist

Confirm that total sources equal total uses; every figure has a named document or assumption; proceeds match the stated financing request; liens and payoffs agree with the debt schedule; equity is verified and available; reserves and fees are not double-counted; and the borrower retains the liquidity represented to the lender. Label estimates and pending items instead of presenting them as final. PFCS can help structure and organize the transaction for third-party capital sources, but lender eligibility, valuation, approved uses, required equity, documentation, pricing, timing, and final funding remain lender-specific.